Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve a number of risks and uncertainties. We
caution readers that any forward-looking statement is not a guarantee of future
performance and that actual results could differ materially from those contained
in the forward-looking statement. These statements are based on current
expectations of future events. Such statements include, but are not limited to,
statements about future financial and operating results, plans, objectives,
expectations and intentions, costs and expenses, interest rates, outcome of
contingencies, financial condition, results of operations, liquidity, business
strategies, cost savings, objectives of management, the impact of the COVID-19
pandemic on our business and other statements that are not historical facts. You
can find many of these statements by looking for words like “believes,”
“expects,” “anticipates,” “estimates,” “may,” “should,” “will,” “could,” “plan,”
“intend,” or similar expressions in this Annual Report on Form 10-K or in
documents incorporated by reference into this Annual Report on Form 10-K. We
intend that such forward-looking statements be subject to the safe harbors
created thereby. Examples of these forward-looking statements include, but are
not limited to:
• progress and preliminary and future results of any clinical trials;
• anticipated regulatory filings, requirements and future clinical trials;
• the effects of the COVID-19 pandemic on our business and financial results;
• the performance of, and our ability to obtain sufficient supply of
cytisinicline in a timely manner from, third-party suppliers and
manufacturers;
• timing and plans for the expansion of our focus to address other methods of
nicotine addiction;
• timing and amount of future contractual payments, product revenue and
operating expenses; and
• market acceptance of our products and the estimated potential size of these
markets.
These forward-looking statements are based on the current beliefs and
expectations of our management and are subject to significant risks and
uncertainties. If underlying assumptions prove inaccurate or unknown risks or
uncertainties materialize, actual results may differ materially from current
expectations and projections. Factors that might cause such a difference include
those discussed in Item 1A “Risk Factors,” as well as those discussed elsewhere
in the Annual Report on Form 10-K.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Annual Report on Form 10-K
or, in the case of documents referred to or incorporated by reference, the date
of those documents.
All subsequent written or oral forward-looking statements attributable to us or
any person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this Annual Report on Form 10-K or to reflect the occurrence of unanticipated
events, except as may be required under applicable
update one or more forward-looking statements, no inference should be drawn that
we will make additional updates with respect to those or other forward-looking
statements.
Overview
We are a clinical-stage pharmaceutical company committed to the global
development and commercialization of cytisinicline for smoking cessation and
nicotine addiction. With more than one billion smokers globally and over 34
million smokers in
preventable disease and death, responsible for more than eight million deaths
annually worldwide. Our primary focus is to address this global epidemic.
We also plan to expand our focus to address other methods of nicotine addiction
such as e-cigarettes/vaping. The use of e-cigarettes continues to be widespread,
with most recent reports from the
indicating nearly 11 million adult users in
2019. While e-cigarettes have been historically viewed as less harmful than
combustible cigarettes, their long-term safety remains controversial. In a
recent study that we conducted surveying approximately 500 users of nicotine
vaping devices or e-cigarettes, approximately 73% of participants responded that
they intend to quit vaping within the next three to 12 months. Of those who
intended to quit even sooner, within the next 3 months, more than half stated
they would be extremely likely to try a new prescription product to help them do
so. We believe that cytisinicline, if approved, could be the first prescription
drug indicated for vape and e-cigarette users who are ready to quit their
nicotine addiction.
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Our management team has significant experience in growing emerging companies
focused on the development of under-utilized pharmaceutical compounds to meet
unmet medical needs. We intend to use this experience to develop and ultimately
commercialize cytisinicline either directly or via strategic collaborations.
Cytisinicline is an established smoking cessation treatment that has been
approved and marketed in Central and
years. Sopharma’s marketed product is a 1.5 mg cytisinicline dosage administered
on a declining titration schedule over a 25 day period. We are evaluating an
improved dosing and administration of cytisinicline that is expected to improve
compliance and outcomes for smokers. We have an exclusive license and supply
agreement with Sopharma for the development and commercialization of
cytisinicline outside of Sopharma’s territories which are predominately located
in Central and
used Sopharma’s cytisinicline product to help treat nicotine addiction,
including over 2,700 smokers in investigator-conducted, Phase 3 clinical trials
in
Cytisinicline is a naturally occurring, plant-based alkaloid. Cytisinicline is
structurally similar to nicotine and has a well-defined, dual-acting mechanism
of action that is both agonistic and antagonistic. It is believed to aid in
smoking cessation and the treatment of nicotine addiction by interacting with
nicotine receptors in the brain by reducing the severity of nicotine withdrawal
symptoms through agonistic effects on nicotine receptors and by reducing the
reward and satisfaction associated with nicotine through antagonistic
properties.
In 2018, the
non-proprietary, or generic, name for the substance also known as cytisine.
We have no products approved for commercial sale and have not generated any
revenue from product sales to date. We have never been profitable and have
incurred operating losses in each year since inception. Our net loss was
million
accumulated deficit of
million
ended
Cytisinicline Ongoing and Recent Clinical Developments
Clinical Trials
Ongoing Company-Sponsored Phase 3 Clinical Trials
In
evaluating the efficacy and safety of 3 mg cytisinicline dosed three times daily
compared to placebo in adult smokers at 17 clinical sites in
ORCA-2 participants have been randomized to one of three study arms to determine
the smoking cessation efficacy and safety profile of cytisinicline when
administered for either 6 or 12 weeks, compared to placebo. All subjects receive
standard behavioral support and have been assigned to one of the following
groups:
• Arm A: 12 weeks of placebo • Arm B: 6 weeks of cytisinicline, followed by 6 weeks of placebo • Arm C: 12 weeks of cytisinicline
The primary outcome measure of success in the ORCA-2 trial is biochemically
verified continuous abstinence during the last 4 weeks of treatment in the 6 and
12-week cytisinicline treatment arms compared to placebo. Each treatment arm
will be compared independently to the placebo arm, and the trial will be
determined to be successful if either or both of the cytisinicline treatment
arms show a statistical benefit compared to placebo. Secondary outcome measures
will be conducted to assess continued abstinence rates through 6 months from the
start of study treatment. In
follow-up visit for the last subject enrolled in the trial was completed in
results are expected to be reported during the second quarter of 2022.
In
confirmatory Phase 3 trial required for registrational approval of cytisinicline
in
3 mg cytisinicline dosed 3 times daily compared to placebo in 750 adult smokers
at 15 clinical sites. ORCA-3 participants will be randomized to one of three
study arms to evaluate cytisinicline administered for either 6 or 12 weeks,
compared to placebo. All subjects will receive standard behavioral support and
will be assigned to one of the following groups:
• Arm A: 12 weeks of placebo
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• Arm B: 6 weeks of cytisinicline, followed by 6 weeks of placebo • Arm C: 12 weeks of cytisinicline
The primary outcome measure of success in the ORCA-3 trial is biochemically
verified continuous abstinence during the last four weeks of treatment in the 6
and 12-week cytisinicline treatment arms compared with placebo. Each treatment
arm will be compared independently to the placebo arm, and the trial will be
determined to be successful if either or both of the cytisinicline treatment
arms show a statistical benefit compared to placebo. Secondary outcome measures
will be conducted to assess continued abstinence rates through 6 months from the
start of study treatment.
Completed Company-Sponsored Phase 2 Clinical Trial
In
trial and defined the dose selection of 3 mg, three times daily, or TID, for our
Phase 3 development. ORCA-1 was the first trial in our
Cytisinicline for Addiction Program, or ORCA Program, that aims to evaluate the
effectiveness of cytisinicline for smoking cessation, nicotine addiction
therapy, and potential benefit in other indications.
ORCA-1 was initiated in
States
standard declining titration schedule as well as a more simplified TID dosing
schedule, both over 25 days. The trial was randomized and blinded to compare the
effectiveness of the cytisinicline doses and schedules to respective placebo
groups. Subjects were treated for 25 days, provided behavioral support, and
followed up for an additional four weeks to assess continued smoking abstinence
after the 25-day treatment.
The primary endpoint in the study was the reduction in daily smoking, a
self-reported measure. Three of the four cytisinicline treatment arms
demonstrated a statistically significant reduction, p<0.05, compared to placebo.
The fourth arm trended to significance (p= 0.052). Across all treatment arms,
over the 25-day treatment period, subjects on cytisinicline experienced a 74-80%
median reduction in the number of cigarettes smoked, compared to a 62% reduction
in the placebo arms.
The secondary endpoint of the trial was a 4-week continuous abstinence rate,
which is the relevant endpoint for regulatory approval. All cytisinicline
treatment arms showed significant improvements in abstinence rates compared to
the placebo arms. The most impressive results were observed in the 3 mg TID
cytisinicline arm which demonstrated a 50% abstinence rate at week 4, compared
to 10% for placebo (p<0.0001) and a continuous abstinence rate, weeks 5 through
8, of 30% for cytisinicline compared to 8% for placebo (p= 0.005). Smokers in
the 3 mg TID arm had an odds ratio of 5.04 (95% CI: 1.42, 22.32) for continuous
abstinence from week 5 to week 8, compared with placebo. The odds ratio, or OR,
is a standard measure of association between an exposure (cytisinicline
treatment) and an outcome (continuous smoking abstinence) such that in this
study, smokers receiving 3 mg cytisinicline TID were 5 times more likely to stop
smoking compared to subjects on placebo.
At week 4, all four cytisinicline arms demonstrated statistically significant
(p<0.05) reductions in expired carbon monoxide, or CO, a biochemical measure of
smoking activity. Expired CO levels had declined by a median of 71-80% in the
cytisinicline treatment arms, compared to only 38% in the placebo arms. The
greater reductions in expired CO levels for the cytisinicline arms versus
placebo suggest that placebo-treated subjects may have over-reported their
reduction in cigarettes smoked or overcompensated with greater inhalation while
smoking fewer cigarettes.
Cytisinicline was well-tolerated with no serious adverse effects, or SAEs,
reported. The most commonly reported (>5%) adverse effects, or AEs, across all
cytisinicline treatment arms versus placebo arms were abnormal dreams, insomnia,
upper respiratory tract infections, and nausea. In the 3 mg TID treatment arm
versus placebo arms, the most common AEs were abnormal dreams, insomnia, and
constipation (each 6% vs 2%), upper respiratory tract infections (6% vs 14%),
and nausea (6% vs 10%), respectively. Compliance with study treatment was
greater than 94% across all arms.
We presented the ORCA-1 results in
of the
Norway
Research
selected 3 mg TID for Phase 3 development. Overall, the 3 mg dose administered
TID demonstrated the best overall safety and efficacy when compared to the 1.5
mg dose or the declining titration schedule evaluated in ORCA-1. At the SRNT
European meeting held in
that showed cytisinicline treatment had an earlier onset of sustained abstinence
compared to placebo and that the cytisinicline TID schedule appeared
more effective for achieving sustained abstinence in smokers who had
previously failed to quit on varenicline compared to the declining titration
schedule.
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In
Administration
Phase 3 clinical program using the simplified 3 mg TID dosing schedule. The FDA
agreed that the 3 mg TID dosing schedule was acceptable.
Recently Completed Investigator-Sponsored Clinical Trial
In
investigator-sponsored Phase 3 RAUORA trial. RAUORA was a non-inferiority study
comparing cytisinicline to Chantix (varenicline) in M?ori (indigenous New
Zealanders) and wh?nau (family) of M?ori. The study was led by Dr.
Walker
2,140 subjects. In total, 1,105 M?ori or wh?nau expressed interest in
participating in the study and a total of 679 were randomized to receive either
cytisinicline or varenicline. The average age of participants in the trial was
43 years and approximately 70% of the participants were women.
The study compared cytisinicline administered on a schedule of 25 days of
declining titration followed by twice-daily dosing for a total of 12 weeks with
varenicline administered on a schedule of seven days of inclining titration
followed by twice-daily dosing for a total of 12 weeks. The primary endpoint was
a comparison of biochemically confirmed continuous abstinence rates at 6 months,
and the trial was designed to assess if the two agents were non-inferior to each
other.
The primary endpoint of the non-inferiority trial was to demonstrate that
cytisinicline quit rates would be no less than 10% lower than the quit rates for
varenicline. Topline results indicated that the RAUORA trial achieved its
primary endpoint in showing that cytisinicline plus behavioral support was at
least as effective as varenicline plus behavioral support at 6 months.
Cytisinicline met the pre-specified non-inferiority endpoint and was trending
towards superiority with an Absolute Risk Difference of +4.29 in favor of
cytisinicline (95% CI -0.22 to 8.79), demonstrating a 4.29% improvement in quit
rates in favor of cytisinicline. Specifically, continuous abstinence rates at 6
months, verified by expired CO, were 12.1% for cytisinicline compared to 7.9%
for varenicline. The Relative Risk was 1.55 on an intent-to-treat basis,
indicating that subjects in the cytisinicline arm were approximately one and a
half times more likely to have quit smoking at 6 months compared to subjects who
received varenicline.
Additionally, significantly fewer overall AEs were reported in
cytisinicline-treated subjects (Relative Risk 0.56, 95% CI 0.49 to 0.65,
p<0.001). Notably, of the subjects who experienced adverse events, cytisinicline
subjects reported significantly less nausea, insomnia and vivid dreams (p<0.05).
The final RAUORA trial results and additional analyses were presented at the SRNT European Annual Meeting inSeptember 2020 and were published in the journal Addiction inMarch 2021 . Also presented at the SRNT Europe Annual Meeting inSeptember 2020 were results from a preclinical study conducted at theUniversity of Cambridge Department of Biochemistry . The study was designed to examine the in vitro binding characteristics of cytisinicline compared to varenicline at the human 5-HT3 receptor. Using a radioligand antagonist displacement design, the study reported an IC50 of 0.50 mM for cytisinicline and 0.25 µM for varenicline, representing a 2000-greater fold agonist binding affinity to the 5-HT3 receptor for varenicline compared to cytisinicline. Agonist activation of 5-HT3 receptors in the brain stem has been shown to induce nausea and vomiting. The data demonstrating the difference in binding potency at the 5-HT3 receptor provide potential rationale for the lower overall incidence of adverse events reported for cytisinicline compared to varenicline. Planned Company-Sponsored Phase 2 Clinical Trial InJuly 2021 , we announced that we were awarded a grant from theNational Institute on Drug Abuse , or NIDA, of theNational Institutes of Health , orNIH , to evaluate the use of cytisinicline as a treatment for cessation of nicotine e-cigarette use. This initial grant award, in the amount of$320,000 , commenced onAugust 1, 2021 , and is being utilized to complete critical regulatory and clinical operational activities, such as protocol finalization, clinical trial site identification, and submission of an Investigational New Drug Application, or IND, to the FDA for investigating cytisinicline in nicotine e-cigarette users. InNovember 2021 , we announced that the FDA has completed their review and accepted the IND application to investigate cytisinicline as a cessation treatment in this population. FollowingNIH review of completed milestones, and subject to availableNIH funding, we expect to receive the next stage of the grant award of approximately$2.5 million , which will enable initiation of the Phase 2 ORCA-V1 clinical study, which we anticipate to occur in the second quarter of 2022, to evaluate cytisinicline in approximately 150 adult nicotine e-cigarette users inthe United States . The full grant award of$2.8 million is expected to cover approximately half of the ORCA-V1 clinical study costs. The Primary Investigators for the grant are our Chief Medical Officer, Dr.Cindy Jacobs , and Dr.Nancy Rigotti , Professor of Medicine atHarvard Medical School and Director,Tobacco Research and Treatment Center ,Massachusetts General Hospital . Non-clinical 58
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Non-clinical toxicology studies were sponsored by the
Complementary
cytisinicline as a smoking cessation treatment. We filed this IND application
for cytisinicline with the FDA in 2017, which included the NCCIH sponsored
non-clinical studies. Additional NCCIH and NCI sponsored non-clinical toxicology
studies were later submitted in support for initiating our Phase 3 program.
Non-clinical toxicology studies that will be required for a New Drug
Application, or NDA, include two longer-term chronic toxicology studies and two
carcinogenicity studies, which are in distinct stages of execution as
company-sponsored studies. Two chronic toxicology studies have been completed
and submitted to the FDA. Additionally, one of two carcinogenicity studies has
been completed, while the second carcinogenicity study is currently in
progress.
Impact of COVID-19 Pandemic
The extent of the impact of the COVID-19 pandemic on our operational and
financial performance will depend on certain developments, including the
duration of the outbreak, impact on our clinical studies, employee or industry
events, and effect on our suppliers, service providers and manufacturers, all of
which are uncertain and cannot be predicted. As a result of the COVID-19
pandemic, we may experience disruptions in our operations, liquidity, supply
chain, facilities, and clinical trials. We may in the future experience more
significant delays in enrollment, participant dosing, distribution of clinical
trial materials, study monitoring and data analysis that could materially
adversely impact our business, results of operations and overall financial
performance in future periods. Specifically, we may experience impact from
changes in how we and companies worldwide conduct business due to the COVID-19
pandemic, including but not limited to restrictions on travel and in-person
meetings, delays in site activations and enrollment of clinical trials,
prioritization of hospital resources toward pandemic effort, delays in review by
the FDA, and disruptions in our supply chain for our product candidates. As of
the filing date of this Annual Report on Form 10-K, the extent to which the
COVID-19 pandemic has impacted our financial condition, results of operations or
guidance has been minimal. The effect of any additional COVID-19 pandemic issues
will not be fully reflected in our results of operations and overall financial
performance until future periods. See the section titled “Risk Factors” for
further discussion of the possible impact of the COVID-19 pandemic on our
business.
Recent Corporate History
On
Restated Certificate of Incorporation, as amended, and effective as of
2020
common stock. As a result of the reverse stock split, each 20 shares of the
outstanding common stock were combined into one share of common stock without
any change to the par value per share. The reverse stock split did not affect
the number of authorized shares of common stock which remains at 150,000,000.
The reverse stock split was approved by our board of directors and stockholders
and was intended to allow us to regain compliance with the NASDAQ’s continued
listing criteria related to the Minimum Bid Price Rule. On
received written confirmation from NASDAQ that we regained compliance with the
Minimum Bid Price Rule and the matter was closed.
Unless otherwise noted, impacted amounts and share information included in the
financial statements and notes thereto have been retroactively adjusted for the
stock split as if such stock split occurred on the first day of the first period
presented. Certain amounts in the notes to the financial statements may be
slightly different than previously reported due to rounding of fractional shares
as a result of the reverse stock split.
License & Supply Agreements
Sopharma License and Supply Agreements
We are party to a license agreement, or the Sopharma License Agreement, and a
supply agreement, or the Sopharma Supply Agreement, with Sopharma, AD, or
Sopharma. Pursuant to the Sopharma License Agreement, we were granted access to
all available manufacturing, efficacy and safety data related to cytisinicline,
as well as a granted patent in several European countries related to new oral
dosage forms of cytisinicline providing enhanced stability. Additional rights
granted under the Sopharma License Agreement include the exclusive use of, and
the right to sublicense, certain cytisincline trademarks in all territories
described in the Sopharma License Agreement. Under the Sopharma License
Agreement, we agreed to pay a nonrefundable license fee. In addition, we agreed
to make certain royalty payments equal to a mid-single digit percentage of all
net sales of cytisinicline products in our territory during the term of the
Sopharma License Agreement, including those sold by a third party pursuant to
any sublicense which may be granted by us. To date, any amounts paid to Sopharma
pursuant to the Sopharma License Agreement have been immaterial.
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In
Bristol
Bristol License Agreement
the
research activities into cytisinicline and its derivatives, including a number
of patent applications related to novel approaches to cytisinicline binding at
the nicotinic receptor level.
In consideration of rights granted by the
nominal license fee and agreed to pay amounts of up to
aggregate, tied to a financing milestone and to specific clinical development
and commercialization milestones resulting from activities covered by the
commercialize any product candidates subject to the
License Agreement
digits and payments up to a percentage in the mid-teens of any sublicense
income, subject to specified exceptions, based upon net sales of such licensed
products.
On
to the
human medicinal uses of cytisinicline across all therapeutic categories from the
derivatives. In consideration of rights granted by the amended
Bristol License Agreement
the execution of the amended
additional amounts of up to
milestone and to specific clinical development and commercialization milestones
resulting from activities covered by the amended
Agreement
License Agreement
financing, development and commercialization milestones. Additionally, if we
successfully commercialize any product candidate subject to the amended
License Agreement
digits and payments up to a percentage in the mid-teens of any sublicense
income, subject to specified exceptions, based upon net sales of such licensed
products. Up to
Research and Development Expenses
Research and development, or R&D, expenses consist primarily of costs for
clinical trials, contract manufacturing, personnel costs, milestone payments to
third parties, facilities, regulatory activities, non-clinical studies and
allocations of other R&D-related costs. External expenses for clinical trials
include fees paid to clinical research organizations, clinical trial site costs
and patient treatment costs.
We manage our clinical trials through contract research organizations and
independent medical investigators at our sites and at hospitals and expect this
practice to continue. Due to our ability to utilize resources across several
projects, we do not record or maintain information regarding the indirect
operating costs incurred for our R&D programs on a program-specific basis. In
addition, we believe that allocating costs on the basis of time incurred by our
employees does not accurately reflect the actual costs of a project.
We expect our R&D expenses to increase for the foreseeable future as we continue
to conduct our ongoing non-clinical studies, and initiate new clinical trials
and registration-enabling activities. The process of conducting clinical trials
and non-clinical studies necessary to obtain regulatory approval is costly and
time consuming and we may never succeed in achieving marketing approval for
cytisinicline. (See “Item 1A. Risk Factors-Risks Related to the Development of
Our Product Candidate Cytisinicline.”)
Successful development of cytisinicline is highly uncertain and may not result
in an approved product. We cannot estimate completion dates for development
activities or when we might receive material net cash inflows from our R&D
projects, if ever. We anticipate we will make determinations as to which
markets, and therefore, which regulatory approvals, to pursue and how much
funding to direct toward achieving regulatory approval in each market on an
ongoing basis in response to our ability to enter into new strategic alliances
with respect to each program or potential product candidate, the scientific and
clinical success of each future product candidate, and ongoing assessments as to
each future product candidate’s commercial potential. We will need to raise
additional capital and may seek additional strategic alliances in the future in
order to advance our various programs.
Our projects or intended R&D activities may be subject to change from time to
time as we evaluate results from completed studies, our R&D priorities and
available resources.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
costs for our personnel in executive, finance and accounting, corporate
communications and other administrative functions, as well as consulting costs,
including market research, business consulting, human resources and intellectual
property. Other costs include professional fees for legal and auditing services,
insurance and facility costs.
Results of Operations
Years Ended
Research and Development Expenses
Our research and development expenses for our clinical development programs were
as follows (in thousands):
Year Ended December 31,
2021 2020 2019
Clinical development programs:
Cytisinicline $ 23,966 $ 6,882 $ 9,674
Total research and development expenses
Research and development expenses for the years ended
and 2019 were
increase in 2021 as compared to 2020 was primarily due to costs incurred as a
result of the enrollment and ramp up of activity in our Phase 3 ORCA-2 trial
that was initiated in the fourth quarter of 2020 and was fully enrolled by the
middle of 2021. The decrease in 2020 as compared to 2019 was primarily due to
the timing of our completion of the ORCA-1 trial, a Phase 2b optimization study
that was initiated in
initiation of the ORCA-2 trial in
General and Administrative Expenses
Our general and administrative expenses were as follows (in thousands):
Year Ended December 31,
2021 2020 2019
Total general and administrative expenses
G&A expenses for the years ended
million
compared to 2020 was primarily due to higher employee expenses associated with
stock-based compensation, and increases in premiums for insurance and clinical
trial media and awareness expenses. The increase in 2020 as compared to 2019 was
primarily due to higher employee costs, increased activity on patent
development, additional market research and public relations activities, and
increased insurance premiums. This was partially offset by lower travel costs as
a result of travel restrictions across
during the COVID-19 pandemic.
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Liquidity and Capital Resources
We have incurred an accumulated deficit of
2021
operate our business and continue or expand our R&D activities and other
operations. We have not generated any revenue from product sales to date, and we
may not generate product sales revenue in the near future, if ever. As of
and a positive working capital balance of
existing cash, cash equivalents and restricted cash, will be sufficient for us
to fund our current operating expenses and capital expenditures into 2023.
We have historically financed our operations through equity and debt financings.
While we believe that we will be able to settle our commitments and liabilities
in the normal course of business as they fall due during the next 12 months, as
a development-stage company with no current sources of revenue, our ability to
support our working capital and capital expenditure requirements in the long
term will depend on many factors, including our ability to raise funds (through
public or private securities offerings, debt financings, government funding or
grants, or other sources, which may include licensing, collaborations or other
strategic transactions or arrangements) to support the ongoing advancement of
our clinical trials and corporate activities.
We did not have during the periods presented, and we do not currently have, any
commitments or obligations, including contingent obligations, arising from
arrangements with unconsolidated entities or persons that have or are reasonably
likely to have a material current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, cash requirements or capital resources.
Lincoln Park Capital Equity Line
On
into a share and unit purchase agreement, which was amended on
or the Purchase Agreement, pursuant to which we have the right to sell to LPC up
to
subject to certain limitations and conditions set forth in the Purchase
Agreement. On
to sell shares of our common stock to LPC in excess of 20% of our outstanding
shares of common stock (as of the date we entered into the Purchase Agreement)
in order to be able to sell to LPC the full amount remaining under the Purchase
Agreement.
Pursuant to the Purchase Agreement, LPC initially purchased 1,644 of our units,
or the Units, at a purchase price of
of (a) one share of our common stock and (b) one warrant to purchase one-quarter
of a share of common stock at an exercise price of
Warrant. Each Warrant became exercisable six months following the issuance date
until the date that is five years and six months after the issuance date and is
subject to customary adjustments. The Warrants were issued only as part of the
Units in the initial purchase of
connection with any other purchases of common stock under the Purchase
Agreement.
After the initial purchase, if our stock price is above
other business day over the 54-month term of the Purchase Agreement, and up to
an aggregate amount of an additional
limitations) of shares of common stock, we have the right, from time to time, in
our sole discretion and subject to certain conditions to direct LPC to purchase
up to 7,500 shares of common stock. The purchase price of shares of common stock
pursuant to the Purchase Agreement will be based on prevailing market prices of
common stock at the time of sales without any fixed discount, and we will
control the timing and amount of any sales of common stock to LPC. As
consideration for entering into the Purchase Agreement, we issued to LPC 617
shares of common stock in
of the Purchase Agreement in
expense reimbursement. The consideration of 617 shares of our common stock were
fair valued based on the closing price of our common stock as at the transaction
date and recognized as part of offering expenses.
During the year ended
common stock pursuant to the Purchase Agreement with LPC. Since entry into the
Purchase Agreement, from
and sold an aggregate of 27,868 shares of our common stock, including the 1,644
shares that were part of the initial purchase of Units. These aggregate sales
resulted in gross proceeds to us of approximately
expenses of
On
with certain accredited investors pursuant to which we sold to the purchasers in
a private placement approximately 280,782 units, or Units, each consisting of
(i) one share of common stock,
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and (ii) a warrant to purchase 0.75 shares of common stock at an offering price
of
The placement agent for the offering received a cash commission on the gross
proceeds from the sale of the Units and was issued a five year warrant upon
substantially similar terms as the investors’ warrants to purchase 25,270 shares
of common stock at an initial exercise price of
proceeds to us, after deducting placement agent expenses and commissions and
offering expenses was approximately
Each warrant became exercisable on
of the initial closing date of the offering, through
the five-year anniversary of the initial closing date of the offering. The
warrants issued pursuant to subscription agreements executed on
are exercisable at a price per share of common stock of
adjustment, and the warrants issued pursuant to subscription agreements executed
on
subject to adjustment. Additionally, subject to certain exceptions, if, after
the initial exercise date, (i) the volume weighted average price of the common
stock for each of 30 consecutive trading days, or the Measurement Period, which,
Measurement Period commences on the closing date, exceeds 300% of the exercise
price (subject to adjustments for stock splits, recapitalizations, stock
dividends and similar transactions), (ii) the average daily trading volume for
such Measurement Period exceeds
equity conditions are met, and subject to a beneficial ownership limitation,
then we may call for cancellation of all or any portion of the warrants then
outstanding.
On
sold 731,707 shares of our common stock at a price of
The registered direct offering raised total gross proceeds of approximately
million
and offering expenses, we received net proceeds of approximately
On
securities, pursuant to which we sold an aggregate of (a) 569,043 shares of our
common stock, including 92,856 shares subject to the underwriter’s option to
purchase additional shares, or the August Shares, and (b) pre-funded warrants to
purchase 142,857 shares of our common stock, or the Pre-Funded Warrants, to the
underwriter. The August Shares were sold at the public offering price of
per share. The Pre-Funded Warrants were sold at a public offering price of
price for the August Shares less a
Pre-Funded Warrant.
The Pre-Funded Warrants are exercisable at any time after the date of issuance.
A holder of Pre-Funded Warrants may not exercise the warrant if the holder,
together with its affiliates, would beneficially own more than 9.99% of the
number of shares of common stock outstanding immediately after giving effect to
such exercise. A holder of Pre-Funded Warrants may increase or decrease this
percentage, but not in excess of 19.99%, by providing at least 61 days’ prior
notice to us.
The underwritten public offering raised total gross proceeds of approximately
discounts and commissions and offering expenses, we received net proceeds of
approximately
offering expenses have been charged against the gross proceeds.
On
securities, pursuant to which we sold an aggregate of 2,472,500 shares of our
common stock, including 322,500 shares subject to the underwriter’s option to
purchase additional shares, or the December Shares. The December Shares were
sold at the public offering price of
We also issued a warrant to purchase 50,000 shares of common stock to the
representative of the underwriters, or the Representative’s Warrant, as a
portion of the underwriting compensation payable in connection with this
offering. The Representative’s Warrant will be exercisable beginning on
2021
ASC 260, the fair value of the Representative’s Warrant of
charged against
The underwritten public offering raised total gross proceeds of approximately
discounts and commissions and offering expenses, we received net proceeds of
approximately
offering expenses have been charged against the gross proceeds.
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On
pursuant to which we sold an aggregate of 3,285,714 shares of our common stock,
including 428,571 shares subject to the underwriter’s option to purchase
additional shares, or the May Shares. The May Shares were sold at the public
offering price of
The underwritten public offering raised total gross proceeds of approximately
discounts and commissions and offering expenses, we received net proceeds of
approximately
offering expenses have been charged against the gross proceeds.
On
debt agreement, or Debt Agreement, with
Innovation Credit Fund VIII, L.P.
of the contingent convertible debt agreement, the Lenders funded
in the form of convertible indebtedness, or Convertible Debt, at closing.
Subject to certain terms and conditions, we may borrow additional
non-convertible term loans in an aggregate original principal amount of up to
Under the terms of the agreement, the Convertible Debt matures on
2023
approval on or prior to
interest at the aggregate of (a) a floating rate per annum equal to the greater
of (i) 2.25% and (ii) the prime rate minus 1.0%, which interest is payable in
cash monthly in arrears, and (b) 7.0% per annum, which interest shall compound
monthly.
Subject to certain terms and conditions, the Lenders may convert all or any part
of the outstanding Convertible Debt and accrued and unpaid interest at any time
prior to maturity into shares of our common stock at a conversion price equal to
all outstanding Convertible Debt, including accrued and unpaid interest, will
mandatorily convert into shares of our common stock, at the conversion price, on
such date, if any, when the closing price per share of our common stock has been
equal to or greater than
date.
We have the right, or Call Right, at any time to repay and retire all (but not
less than all) of the outstanding Convertible Debt and accrued and unpaid
interest, if any, prior to its conversion by payment of a premium determined
based on the date of such repayment equal to:
• 125% of the principal amount of the Convertible Debt including accrued
paid-in-kind interest, or PIK, if the Call Right is exercised on or
before the 18-month anniversary of the date of the Debt Agreement; and
• 150% of the principal amount of the Convertible Debt including accrued
PIK, if the Call Right is exercised after the 18-month anniversary of the
date of the Debt Agreement,
in either case together with all accrued and unpaid interest on the principal
balance of the Convertible Debt. If the Call Right is exercised by us, the
Lenders will retain certain lookback rights in the event we enter into an
agreement to be acquired in the 12 months following the exercise of the Call
Right. We agreed to grant the Lenders a security interest in virtually all of
our assets, including our patents and other intellectual property as security
for our obligations under the Debt Agreement.
At-the-Market Sales Agreement
On
or ATM, with
shares of common stock with an aggregate offering price of up to
During the year ended
ATM. As of
Cash Flows
Operating Activities
For the years ended
activities was
The increase in cash used in operations in 2021 as compared to 2020 was
primarily due to an increase in research and development expenses related to our
ORCA-2 trial. The decrease in cash used in operations in 2020 as compared to
2019
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was primarily attributable to a decrease in research and development expenses
related to our ORCA-1 trial, which was partially offset by expenses incurred in
connection with the initiation of the ORCA-2 trial in
Financing Activities
For the years ended
financing activities was
respectively. Net cash provided by financing activities for the year ended
offering,
cash provided by financing activities for the year ended
relates to proceeds from our
offering,
our
the year ended
public offering, from warrant exercises and from our purchase agreement with
LPC.
Investing Activities
There were no investing activities in 2021. Net cash used in investing
activities for the year ended
to the purchase of equipment. Net cash provided by investing activities for the
year ended
involving short-term investments in the normal course of business.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and notes thereto. Actual results could differ from these estimates.
Estimates and assumptions principally relate to estimates of the initial fair
value and forfeiture rates of stock options issued to employees and consultants,
the estimated compensation cost on performance restricted stock unit awards,
clinical trial and manufacturing accruals, estimated useful lives of property,
plant, equipment and intangible assets, estimates and assumptions in contingent
liabilities.
Intangible Assets
Our intangible assets are subject to amortization and are amortized using the
straight-line method over their estimated period of benefit. We evaluate the
carrying amount of intangible assets periodically by taking into account events
or circumstances that may warrant revised estimates of useful lives or that
indicate the asset may be impaired.
Impairment of Long-Lived Assets
We review long-lived assets for impairment whenever events or changes in
circumstances indicate that the asset’s carrying amount may not be recoverable.
We conduct our long-lived asset impairment analyses in accordance with ASC
360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires
us to group assets and liabilities at the lowest level for which identifiable
cash flows are largely independent of the cash flows of other assets and
liabilities and evaluate the asset group against the sum of the undiscounted
future cash flows. If the undiscounted cash flows do not indicate the carrying
amount of the asset is recoverable, an impairment charge is measured as the
amount by which the carrying amount of the asset group exceeds its fair value
based on discounted cash flow analysis or appraisals.
that is expected to benefit from the combination as of the acquisition date.
event occurs or circumstances change that would more likely than not reduce the
fair value of the reporting unit.
Government Grants
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We account for government grants by recognizing the benefit of the grant as
qualifying expenditures are incurred provided that there is reasonable assurance
that we have complied with all conditions under the terms of the grant and that
the amount requested for reimbursement will be received. The government grant
reduces the research and development expenses to which it relates on our
statement of profit and loss.
Research and Development Costs
Research and development costs are expensed as incurred, net of related
refundable investment tax credits, with the exception of non-refundable advance
payments for goods or services to be used in future research and development,
which are capitalized in accordance with ASC 730, “Research and Development” and
included within Prepaid Expenses or Other Assets depending on when the assets
will be utilized.
Clinical trial expenses are a component of research and development costs. These
expenses include fees paid to contract research organizations and investigators
and other service providers, which conduct certain product development
activities on our behalf. We use an accrual basis of accounting, based upon
estimates of the amount of service completed. In the event payments differ from
the amount of service completed, prepaid expense or accrued liabilities amounts
are adjusted on the balance sheet. These expenses are based on estimates of the
work performed under service agreements, milestones achieved, patient enrollment
and experience with similar contracts. We monitor each of these factors to the
extent possible and adjust estimates accordingly.
Stock-Based Compensation
Under the fair value recognition provisions of the ASC 718, “Stock
Compensation”, we use the modified prospective method with respect to options
granted to employees and directors. The expense is amortized on a straight-line
basis over the graded vesting period.
Restricted Stock Unit Awards
We grant restricted stock unit awards that generally vest and are expensed over
a four-year period. We also granted restricted stock unit awards that vest in
conjunction with certain performance conditions to certain executive officers
and key employees. At each reporting date, we evaluate whether achievement of
the performance conditions is probable. Compensation expense is recorded over
the appropriate service period based upon our assessment of accomplishing each
performance provision or the occurrence of other events that may have caused the
awards to accelerate and vest.
Warrants
We account for warrants pursuant to the authoritative guidance on accounting for
derivative financial instruments indexed to, and We account for warrants
pursuant to the authoritative guidance on accounting for derivative financial
instruments indexed to, and potentially settled in, a company’s own stock, on
the understanding that in compliance with applicable securities laws, the
warrants require the issuance of registered securities upon exercise and
therefore do not sufficiently preclude an implied right to net cash settlement.
We have warrants classified as equity and these are not reassessed for their
fair value at the end of each reporting period. Warrants classified as equity
are initially measured at their fair value and recognized as part of
stockholders’ equity. Determining the appropriate fair-value model and
calculating the fair value of registered warrants requires considerable
judgment, including estimating stock price volatility and expected warrant life.
The computation of expected volatility was based on the historical volatility of
comparable companies from a representative peer group selected based on industry
and market capitalization. A small change in the estimates used may have a
relatively large change in the estimated valuation. We use the Black-Scholes
pricing model to value the warrants.
Recently Adopted Accounting Policies
In
Standards Update ASU No. 2016-02, which requires lessees to recognize leases
on-balance sheet and disclose key information about leasing arrangements. The
new standard establishes a right-of-use, or ROU, model that requires a lessee to
recognize a ROU asset and lease liability on the balance sheet for all leases
with a term longer than 12 months. Leases were classified as finance or
operating, with classification affecting the pattern and classification of
expense recognition in the consolidated statements of loss and comprehensive
loss.
We adopted the standard on the effective date of
use the modified retrospective method. Consequently, financial information will
not be updated and the disclosures required under the new standard will not be
provided for dates and periods before
lease recognition exemption for all leases that qualify. This means, for those
leases that qualify, we will not recognize ROU assets or lease liabilities, and
this includes not recognizing ROU assets or lease liabilities for existing
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short-term leases of those assets in transition. We also elected the available
practical expedients and implemented internal controls to enable the preparation
of financial information on adoption.
The standard had a material impact on our consolidated balance sheets, but did
not have an impact on our consolidated statements of loss and comprehensive
loss. The most significant impact was the recognition of ROU assets and lease
liabilities for operating leases, while our accounting for finance leases
remained substantially unchanged.
In
Measurement, which both modifies and clarifies the disclosure requirements for
fair value measurement. This update is effective for financial statements issued
for fiscal years beginning after
permitted. The adoption of this standard did not have a significant impact on
our financial position or results of operations.
In
Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity’s Own Equity, or ASU
2020-06. ASU 2020-06 simplifies the accounting for convertible instruments, the
accounting for contracts in an entity’s own equity, and the related earnings per
share calculations. The new standard is effective for fiscal years beginning
after
an interim period for which financial statements (interim or annual) have not
been issued or have not been made available for issuance.
We elected to early adopt the standard effective in 2021. The adoption of this
standard did not have any impact on our prior period financial statements.
As a result of adopting ASU 2020-06, we are not required to separately record
the conversion feature of the convertible debt but instead account for the
convertible instrument and conversion feature as a single unit of debt.
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